Scope 3 Emissions Under UK SRS

The Timeline

Under FCA CP26/5, Scope 3 greenhouse gas emissions disclosure is subject to a one-year transitional relief. From financial years beginning on or after 1 January 2028, Scope 3 moves to a comply-or-explain basis. This means companies have one year from the mandatory start of UK SRS S2 reporting (January 2027) during which Scope 3 disclosure is not required. From the second year of mandatory reporting, companies must either disclose their Scope 3 emissions or explain why they have not.

What Scope 3 Disclosure Requires

When Scope 3 disclosure is required, companies must assess all 15 categories of the GHG Protocol Corporate Value Chain (Scope 3) Standard for materiality. The 15 categories cover upstream emissions (purchased goods and services, capital goods, fuel and energy-related activities, upstream transportation and distribution, waste, business travel, employee commuting, upstream leased assets) and downstream emissions (downstream transportation and distribution, processing of sold products, use of sold products, end-of-life treatment, downstream leased assets, franchises, investments).

Companies must disclose emissions for each material category, the methodology used to calculate emissions for each category (including whether primary or estimated data was used), the data quality of the inputs, and the assumptions and estimation techniques applied. This data quality disclosure is a new requirement that goes beyond what most companies currently provide.

Why Scope 3 Is Genuinely Difficult

Scope 3 emissions typically represent 70–90% of a company's total carbon footprint, but they occur outside the company's direct control — in the value chain. Measuring them requires data from suppliers, customers, and other third parties who may not have their own emissions measurement programmes. The practical challenges include limited supplier data availability and quality, the use of industry-average emission factors rather than primary data, complex allocation methodologies for multi-product supply chains, and the difficulty of obtaining meaningful data for categories such as use of sold products or end-of-life treatment.

The one-year transitional relief acknowledges these difficulties. But relief is not indefinite. Companies that wait until January 2028 to begin their Scope 3 programmes will face a compressed timeline to build supplier engagement processes, data collection systems, and calculation methodologies. Companies that start now will be in a materially better position when the comply-or-explain obligation takes effect.

The Comply-or-Explain Standard

From January 2028, companies that do not disclose Scope 3 must explain why. This is not a tick-box exercise. The explanation must be specific to the company's circumstances — describing which Scope 3 categories could not be disclosed, why the data was not available or reliable, and what steps the company is taking to improve its Scope 3 data capability. A general statement that “Scope 3 data is not yet available” is unlikely to satisfy the FCA or investor expectations.

What Companies Should Do Now

• Map your value chain and identify which of the 15 Scope 3 categories are likely to be material to your business.
• Assess current data availability for each material category — distinguish between primary data from suppliers and estimated data from emission factor databases.
• Begin supplier engagement programmes to improve primary data collection over time.
• Establish a calculation methodology and document it — the methodology disclosure is a requirement even if the data is estimated.
• Consider third-party verification of your Scope 3 methodology before public disclosure.